There’s been an awful lot of chatter lately about the Calgary Flames and their arena project. Ironically, the chatter has been about the lack of chatter about the arena project coming from the Flames organization.
But when you think about the bigger picture, about the Canadian economic and the political landscape, the radio silence may make a bit of sense.
I think the Flames are waiting to see how the political landscape sits after October’s federal election.
THE ECONOMICS OF RICHNESS
There’s an old adage often repeated about billionaires: “You don’t get rich by spending a lot of your own money.”
The Flames owners are a bunch of rich businessmen who didn’t get to where they are by burning a lot of their own capital on their projects. Particularly in the energy sector – but generally elsewhere, too – firms partner up in order to minimize economic risk. And in terms of massive construction projects like the proposed mega arena that’s being discussed, the idea is (a) to avoid putting up money up-front and/or (b) avoiding having to pay a ton of interest on loans that allow them to avoid putting up money up-front.
But public finance isn’t what it used to be, and infrastructure pressures throughout Canada have lowered governmental willingness to put money towards arenas and stadiums – as well as the public’s appetite to give money to projects without much obvious direct public benefit, particularly compared to roads, schools and hospitals.
THE FUNDING WELL RUN DRY
If you live in Calgary, you’ve probably noticed one thing: there’s only recently been a big spike in transportation projects. Between the West LRT, the ring road and ongoing discussions about the South-Central/Green Line, there’s a lot of money that’s headed into town in recent years.
If you live in Calgary, you probably have also noticed that outside of that small handful of big projects, much of Calgary’s transportation infrastructure is quite old. The major arterial roadways in town date back to the 1970s in some cases, and in many ways Calgary is a city that’s outgrown its old road system and is in dire need of refurbishing. It’s a city of nearly 1.2 million people (and almost as many cars) with a system set up for roughly 500,000 or so cars. Between age and use, there’s been a lot of money being sunk into maintaining the transportation network in town.
The upside is that in keeping with the recent societal interest in sustainability, transit-oriented development and basically getting cars off the road wherever possible, the city’s been investing in a bunch of things designed to modernize the city’s roadways and transportation system in general. But combined with a downturn in the economy and a general antipathy towards taxation increases across all levels of government, that means that the money that the provinces and cities have to put towards infrastructure projects are typically going towards roads and trains and buses, and not towards arenas or big recreation projects.
The perception of governments not wanting to invest in those projects is so well-known, Edmonton mayor Don Iveson didn’t even both to kick the tires with the new NDP government about the new Edmonton Oilers building. Iveson was quoted at the time: “We’ve been told no several times by previous governments. I’m pretty
sure we’ll get told no with this new government. That’s not how I want
to start out working with them. We have a bigger vision.”
That said, with the shiny occasion of Canada’s 150th birthday coming up just over the horizon, and the hearts and minds of voters probably still somewhat undecided, the spring federal budget included a few handy items that could be helpful for the Flames ownership if they wish to keep some money in the bank.
In general, there’s a few places where the Flames, or the city or province (on their behalf), could ask for funding.
Under the umbrella of what’s called the New Building Canada Fund, there’s billions of dollars available for things like roads, public transit projects, recreation facilities and things like that. The reported inclusion of the amateur fieldhouse in the proposed building potentially makes the project eligible for some funding. Governments like putting money into amateur sports facilities because most of the time, there’s a ribbon-cutting and a permanent plaque by the entrance saying who contributed. The next time you head down to Winsport or your local arena, take a look around – odds are there was a ribbon-cutting ceremony and some minister got to hold giant novelty scissors.
Iif the proposed West Village location goes forward, there’s two big issues: traffic and concern over contaminated soil reclamation. But there are funding opportunities in those areas, too.
For traffic, the city is already knee-deep in a project that’s necessary even if the Flames build their arena on the moon – Crowchild Trail. Traveling on Crowchild over the Bow River during rush hour is an exercise in patience (and insanity), and quite often when I’m driving down Bow Trail prior to Flames games I can still see a massive, massive line of cars going north – even when I’m rushing to make at 7pm puck drop. That’s crazy, and there’s probably some level of funding available from the federal government based on the importance of the road, the scope of the project to fix that roadway for traffic flow, and any number of other reasons. Regardless of what happens, there’s a strong chance that roadway won’t be a problem in the future. The study is slated to be complete by the end of 2016, and following that, odds are the city will get moving on a plan to fix the problems they identify. Depending on what happens in the West Village, that may also mean less money available to help with a Bow Trail realignment – if it goes that way. (To be honest, westbound Bow Trail is about as far north as the arena project would go and eastbound Bow is about as south as it’d go, so it’s not like realignment would be essential.)
In terms of the land itself, the West Village is the former site of Canada Creosote, and the area would need to have the soil remediated before anything could really be done with it. So if you, like me, have ridden the C-Train past Sunalta and gone “Hey, they really should do something more with that nice land than car dealerships,” well, they can’t. Unless they get a bunch of money to do it.
But hey, here’s the federal government to the rescue again! There’s a Federal Contaminated Sites Action Plan, which the recent federal budget just jazzed up with more funding. Granted, it’s unlikely that the old Canada Creosote site could be completely cleaned up on the federal dime – there’s a lot of projects that fall under the purview of the Contaminated Sites umbrella – but if you’re the Flames ownership, you’d be very happy if any part of the project got funded even in part. It’s money you don’t have to spend.
WHY THE ELECTION MATTERS
As anybody in business will tell you, it’s not what you know, it’s who you know. The Calgary Flames ownership group is well-established in any number of important circles in Canada and after almost a decade of Conservative Party rule in Ottawa, I think by now the Flames have made the right friends and at the very least know who the key decision-makers are in the relevant portfolios. And just like a traffic light frustratingly turning red just as you hit the intersection, right as the Flames are seemingly all set to get rubber on the road for their shiny new building… there’s a danger that October’s election may put in a new government.
When you know the government and its priorities and tactics, you can make plans with some notion of how everybody will behave and react. So if you’re trying to estimate costs and build a business plan for a $500 million project, it really helps to know the political and economic landscape. The economic landscape is already tenuous, and having to break in a whole new set of political decision-makers at the federal level – whether they’re New Democrat or Liberal or whatever – is undeniably not an ideal situation.
A change in the federal government wouldn’t mean that the arena project is doomed. The same amount of money will probably be available for the arena project if the NDP or Liberals are in power than if the Conservatives are. The bigger challenge will be logistics – having to get familiar with new decision-makers, with their funding priorities and familiarizing them with the project. Ever have to get a new boss or department head at work? It’s like that, except with a $500 million construction project with complex timelines and multiple stakeholders involved.
I have no inside information about the arena project. But knowing what I know about billionaires and their hopes not to sink too much of their own coin into projects, I’d bet that the Flames are hoping for some amount of help from the federal government on some part of this extensive, expensive project.
That’s why I doubt we hear anything concrete about the arena project until after October 19’s federal election.